S&P: Consolidation likely to strengthen Italian banks

The ongoing consolidation will redefine the Italian banking sector : S&P believes that " mergers and acquisitions will continue to attract the most attention" and "the outcome of UniCredit 's bid for Banco BPM , BPER 's bid for BP Sondrio , Mediobanca 's bid for Banca Generali , and Monte dei Paschi 's bid for Mediobanca could reshape the banking sector." This, according to the mid-year outlook for the European banking sector, "is likely to pave the way for stronger banks, although mergers and acquisitions in Italy have been mixed." Furthermore, according to Standard and Poor's , "banks' funding profiles will remain stable following the gradual exit from Targeted Long-Term Refinancing Operations (TARGET) III. Differences between banks, and consequently vulnerabilities, could become more evident." Italian banks are nevertheless preparing to face a complex phase from a position of strength. Their ability to generate profits "should remain solid." Specifically, it states, "Although it peaked in 2024, we expect profitability to remain structurally sound, above the cost of equity. Reducing fragmentation, the dominance of larger institutions, and more agile business models will contribute to this outcome. Revenue diversification and cost efficiency will help banks offset the impact of declining net interest margins in 2025 and 2026."

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